Many policymakers and economists fret that publicly-held debt approaching 100% of annual GDP is too high. The “correct” level of debt is difficult to assess; researchers think too much debt can be a drag on growth, but only if it crowds out private spending or leads to higher interest rates. The global economy, however, is in many ways dependent on a steady supply of US debt. Perhaps the biggest reason to push down current borrowing is to make sure the US has the fiscal capacity to weather the next emergency. One thing that won’t help reduce the debt, however, is a financial crisis caused by debt ceiling brinksmanship.

Despite the Fed’s tightening, growth remains strong and unemployment is low. That’s arguably a good environment to reduce government spending after the enormous surge in pandemic aid. Spending is already falling faster, as a share of the economy, than it did after the 2008 recession.

There are ways to keep driving spending down (pdf), but they require delivering pain to somebody: Eliminating subsidies to everyone, from agribusiness to defense contractors, leads to lobbyists for affected industries pounding down lawmakers’ doors, while cutting benefits to children, the sick or the poor remains broadly unpopular. Tax hikes can be more palatable but can generate political repercussions among influential upper class voters.

The last time anyone tried to hash out a compromise on all of this—the 2011 glory days of the Bowles-Simpson commission—Republicans backed out because of proposed tax increases, and Congress wound up cutting spending 10% across the board. (Republicans reversed many of the cuts when President Donald Trump took office in 2017.)

Debt politics are different in 2023

Absent the specter of the European debt crisis or a Republican party united on fiscal issues, the politics of debt reduction sit differently. Some Republican politicians, like Trump and Senate leader Mitch McConnell, are already warning that the cuts for popular but expensive programs such as Social Security and Medicare implied by a debt default aren’t going to help the party gain power in the next election. Republican member of Congress Nancy Mace told NBC over the weekend spending must be cut but couldn’t name a single target for reductions. Instead of cuts, conservative Democratic Senator Joe Manchin is pushing to lift the limit on taxable Social Security wages.

It’s easy—it’s always easy—to imagine the Biden White House coming together with Republicans in Congress to find a moderate deficit reduction package that raises taxes and cuts some spending. The White House certainly imagines it, since administration spokespeople such as Treasury Secretary Janet Yellen have made clear it won’t engage with novel plans to avoid a debt ceiling crisis like minting a platinum coin or various other finance shenanigans. Still, the patience—or complacency—about the debt ceiling might leave Washington in an uncomfortable place come this summer: It remains to be seen if the hardliners among Republicans have the patience for bipartisan legislating. If global investors won’t give them the debt crisis they want, they seem eager to create it.

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